Here's part two. Air bnb's and other short term rentals can qualify as an exception to the passive activity rules.
Here are the main rules:
If each rental period is less than 7 days and you materially participate in the air bnb (meaning you self manage the property), the IRS no longer considers this real estate activity passive but instead a non passive activity. So what that means for you is you can use losses from that property to offset your W2 or self employed income without RE Pro status.
The main question is how do you create a big enough loss to offset your non passive income. And the answer is through depreciation. You can do something called a cost segregation study which, long story short, will essentially accelerate the depreciation on the property which can create a $100k or $150k loss on the property. The amount of depreciation will depend on the value of the property.
And that loss can offset your W2 or self employment income.
This sounds great, but keep in mind you have to self manage the property. That means you do the bookings, you restock all supplies, you deal with repairs, you are the property manager.
So if that's something you'd like to take on and try, let's talk about the specifics.
Hope this helps. Let me know if you have questions.